Microfinance Practices of Bandhan Bank: A Study of Borrower Outreach and Loan Utilisation

Abstract

“Bandhan” is the most popular and trusted brand among poor and lower middle class women of West Bengal, Assam and Bihar. Chandra Shekhar Ghosh founded Bandhan Financial Services in 2001. He realised that lending to small entrepreneurs can be a profitable business. In 2009 Bandhan was registered as a non-banking financial company providing selected banking services. In 2015 Bandhan commenced operations as a bank. Before converting into bank, it was the largest microfinance company in India. It has a large base of borrowers for the quarter ended 31st  March 2018, Bandhan Bank reported a net profit of ₹388 crore, representing a year-on-year increase of 20.3% from ₹322 crore in the corresponding quarter of the previous year. For the full financial year 2017–18, the Bank reported a net profit of ₹1,345.6 crore, an increase of about 21% over the previous year. Non-interest income grew 57.4% at ₹ 203 crores for the quarter ended 31st March 2018 against ₹ 129 crores in the corresponding quarter of the previous year. Net interest income for the quarter ended 31st  March 2018 increased by 25.2% to ₹863 crore, compared with ₹689 crore in the corresponding quarter of the previous year. For the full year, the annual report states NII of ₹3,032.24 crore for FY 2017–18 compared with ₹2,403.50 crore in FY 2016–17.

 The paper studies the working of the bank, the nature of microfinance of Bandhan, the role of doorstep service centres, analyse the utilisation pattern of micro loans and the various reasons for success of the Bandhan Bank. The point of difference in its functioning when compared to other microfinanciers is their doorstep service centre is given much focus on. From a small NGO to a NBFC and into a bank today it has gone miles before being the largest microfinance company in its preceding glorious years.